Common Reporting Standards (CRS)
CRS requires a report to be submitted by all entities with a reporting obligation. Effectively, this means that all entities need to check whether they have reporting requirements under CRS. The vast majority will not have reporting obligations.
There are three steps to determine whether an entity has a reporting obligation under CRS:
- Is the entity a Financial Institution (FI)?
- Is the FI a New Zealand Financial Institution (NZFI)?
- Is the NZFI a Reporting NZFI?
An entity that answers yes to all the above will be a Reporting New Zealand Financial Institution. If the answer for any of the above is no, then the entity will be classified as a non-financial entity (NFE) and does not have reporting requirements. If all interest holders (e.g. beneficiaries) are New Zealand tax resident, then there will also be no reporting obligation.
Is the entity a Financial Institution?
Any entity can fall under the definition of a financial institution (e.g. companies, partnerships, unit trusts, trusts). Individuals are not defined as an entity, so will not have to report under CRS.
There are four different classes of financial institution: Depository Institution, Specified Insurance Company, Custodial Institution and Investment Entity.
Managed Investment Entity
An entity is a Managed Investment Entity where it meets both elements of this test:
- It derives 50% of its income from investing, reinvesting or trading in financial assets (shares, bonds, debentures, money); and
- It is managed by another financial institution where the manager has discretionary authority over the assets allo-cated to them.
Is the entity a New Zealand Financial Institution?
A financial institution (excluding a trust) will be a New Zealand Financial Institution (NZFI) if it is a New Zealand tax resident or has a New Zealand branch. A trust will be an NZFI where one or more trustees are New Zealand tax residents, under New Zealand law.
Is the Entity a Reporting New Zealand Financial Institution?
An entity is a Reporting NZFI unless it falls within the definition of a Non-Reporting NZFI.
The only relevant exclusion in most cases is where a trust has a trustee that is a Financial Institution which has agreed to carry out CRS compliance on behalf of the Trust.
Reporting NZFIs are required to submit CRS via MyIR on Inland Revenue’s website. An entity simply registers for CRS and submits a number of prescribed forms to complete the report. If there are no foreign account holders, then a nil report is required.
A reporting NZFI must report three main categories of information on foreign account holders, along with its identi-fier to Inland Revenue by 30 June 2018.
- I dentity information: name, address, jurisdiction(s) of residence, tax identification number(s), and date of birth (where applicable).
- Financial Account Information: Account balance/value as at the end of the reporting period or the closure of the account. Additional information is reported based on the type of account being reported on.
- Other Information: A list of accounts where the residency of an account holder is unable to be determined.
There are steep penalties for non-compliance so check with your Staples Rodway advisor if in any doubt about your obligations.